Background

The Reserve Bank of India, through its Notification No. FEMA 13 (R)/2016-RB dated 1^st April, 2016, replaced the Foreign Exchange Management (Remittance of Assets) Regulations, 2000 (“Old Remittance Regulations”) with Foreign Exchange Management (Remittance of Assets) Regulations, 2016 (“New Remittance Regulations”). Though, largely the New Remittance Regulations are the same as the Old Remittance Regulations, there are a few changes that need to be highlighted. This article will bring out a detailed comparison of both the Regulations highlighting the additions and deletions.

Change in definition of PIO

1. The definition of Person of Indian Origin (“PIO”) has been changed in the New Remittance Regulations. PIO, as per the New Remittance Regulations, means a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:
   • Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or
   • Who belonged to a territory that became part of India after the 15th day of August, 1947; or
   • Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
   • Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c).

Explanation: for the purpose of this sub-regulation, the expression ‘Person of Indian Origin’ includes an ‘Overseas Citizen of India’ cardholder within the meaning of the Citizenship Act, 1955.

2. Points (a), (b) and the Explanation have been added in the definition in the New Remittance Regulations.
3. The Old Remittance Regulations also included, in the definition of a PIO, a person who at any time held the Indian Passport. This has been deleted from the definition in the New Remittance Regulations.

Additional requirement for remittance by NRI or PIO from NRO Account

1. An additional requirement has been added in the New Remittance Regulations for remittance by a NRI/ PIO of an amount <= USD 1 million per financial year through an Authorized Dealer.
2. Where the remittance is to be made from the balances held in the NRO account, the account holder shall furnish an undertaking to the Authorized Dealer that “the said remittance is sought to be made out of the remitter’s balances held in the account arising from his/ her legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account and if such is found to be the case, the account holder will render himself/ herself liable for penal action under FEMA.”

Regulations regarding taxation on remittance of assets

1. An authorized dealer may, without approval from the RBI, affect remittance of assets as per the Regulations and also allow remittance out of assets of Indian companies under liquidation subject to certain conditions.
2. The following requirements under Regulation 4 of the Old Remittance Regulations have been removed from such Regulation 4 of the New remittance Regulations:
   • No objection or tax clearance certificate from IT Authority for remittance
   • Payment of applicable taxes in India, if any.
3. However, a new Regulation 8 has been added in the New Remittance Regulations, which requires any transaction involving remittance of assets to be subject to the applicable tax laws in India.

List of documents for application to RBI

1. In the Old Remittance Regulations, a specific list of documents has been provided which must accompany the application to RBI for permission of remittance of assets in certain cases.
2. The list of such documents is as under:
   • copy of the Reserve Bank’s permission for establishing the branch/office in India;
   • Auditor’s certificate,-
     1. indicating the manner in which the remittable amount has been arrived and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;
     2. confirming that all liabilities in India including arrears of gratuity and other benefits to employees etc. of the branch/office have been either fully met or adequately provided for;
     3. confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India;
   • no-objection or Tax clearance certificate from Income-Tax authority for the remittance; and
   • confirmation from the applicant that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
   • a report from the Registrar of Companies regarding compliance with the provisions of Companies Act in case of winding up of the office in India.
3. No such list now forms a part of the New Remittance Regulations. This leads to an uncertainty on which documents need to be submitted with the application to RBI for permission for remittance of assets in certain cases.